Weekly Update – April 27, 2012
The Dow was able to overcome a week of uninspiring economic data to finish up 199 points, or 1.5% – the Dow’s second-largest weekly gain of 2012. For the month of April, the index is flat, and for the year, up 8.3%.
In the US, strong corporate earnings (approximately 80% of the companies that have reported have announced to the upside) overshadowed a batch of weak economic data, including flat weekly unemployment filings and declines in consumer confidence, March new home sales, and March durable goods orders. More surprising was the first quarter GDP number, which came in at 2.2%, below the estimate of 2.5% and fourth quarter 2011 3.0% reading. In contrast to the GDP number, first quarter consumer spending increased 2.9% year-over-year. Much of the increase was attributed to the warmer-than-average weather, creating concerns that the front-loading will lead to a downturn towards the end of the year.
In Europe, Spain remains in the crosshairs, as the country’s debt was downgraded by S&P late Thursday for the second time this year. The downgrade was expected, however, and European stocks shrugged off the news to close Friday in the green.
Despite the rather flat start to the second quarter, our trust preferred portfolios, on the strength of strong bank earnings and the Fed’s low-interest-rate stance, continue to return almost 11%, on average, year-to-date through yesterday, Thursday, April 26, beating the Dow by almost 3%.
Next week, the economic reporting highlight will be the release of the April employment report on Friday. Expect the number of jobs added to be below the January – March average of 250,000 and for the unemployment rate to remain at 8.2%.
Have a good weekend,